Virginia’s general revenues through October were ahead of the state’s annual forecast, but the collections are below the revenue numbers from the same time last year.
October’s revenue collections were 6.7% higher than September, exceeding the sate’s projected 1.8% decline. The numbers were 2.7% below October 2019 revenue collections. Payroll withholding taxes, which account for nearly two-thirds of the state’s revenue, were up 0.4%, and sales tax collections, which account for 16% of revenue, increased by 7.8%.
“The drop in October revenues largely reflects an anticipated decline in payroll withholding,” Virginia Secretary of Finance Aubrey Layne said in a statement. “Although October is not a significant month for revenue collections, this report confirms that Virginia continues to be on a prudent path of forecasting revenues and budgeting in these unique times.”
Stephen Haner, a senior fellow for state and local tax policy at the free-market Thomas Jefferson Institute for Public Policy, told The Center Square the state saw an increase because of tax hikes approved by the General Assembly.
“In the first four months of the fiscal year, Virginia’s tax collections are up almost 7 percent from pre-pandemic levels,” Haner said. “The revenue forecast called for a loss in revenue, but the opposite is happening. This is because of all the tax increases recent General Assembly sessions have approved for Governor Northam.
“Higher income taxes and the sales tax on internet purchases are buoying the general fund, and the big gasoline tax increases on July 1 are keeping the transportation money ahead of forecast,” Haner said. “Nobody saw the pandemic coming, so these were just intentional tax increases. Once the pandemic is over and the economy is better, the higher taxes will really kick in.”
Haner said Virginia has been cautious with spending during the pandemic, but he expects spending to increase if revenue continues to spike.
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